Finding and backing tech start-ups that may one day grow into unicorns is no easy feat. But a group of angel investors is hoping to prove otherwise. These angel investors are senior executives who have worked or are working for well-known and established tech names — the likes of Apple, Google, Microsoft Corp, SoftBank and others.
Known as XA Network, this loose community of angel investors seeks to invest in early-stage tech start-ups from across Southeast Asia. This includes start-ups that are based in this region but are not necessarily operating in these markets.
XA Network usually focuses on start-ups that operate in technology segments, of which its members have familiarity and the relevant expertise in. These segments include smart mobility, consumer service advertising technology and FinTech. Other segments, in which members do not have familiarity and the relevant expertise — for instance, MedTech — are usually avoided.
One crucial quality that XA Network looks for before investing in a start-up is the calibre and strength of the start-up founders. “We look for a clearly identified CEO, who is [building the start-up] full time. We look for a team of leaders who is coachable and has a good orientation towards managing budgets and costs, while they develop services,” Maya Hari tells The Edge Singapore in an interview. She is a member of XA Network and vice president and managing director of Twitter’s Asia Pacific operations.
XA Network also looks at the market opportunity for each start-up. “Is the opportunity large enough? And are there early indications of traction and product market fit for what the company is trying to build?” says Hari. She shares that she was once a start-up founder too, setting up an e-commerce business that eventually failed. But that painful entrepreneurial experience taught her a lot of about the pitfalls of building a tech company, she says.
In turn, start-ups getting investment from XA Network get the opportunity to leverage the expertise and experience of its members. For instance, the team at vegan discovery and consumer advocacy platform abillionveg has been mentored by Hari herself, who advised the start-up on how best to scale up its operations from Singapore into other markets and which ones.
Thus far, XA Network has invested in over 20 start-ups. They include Malaysia-based social commerce platform AVANA, Singapore-based food technology company TurtleTree Labs and Indonesia-based freelance platform operator Sampingan. Collectively, the angel investor group has deployed more than $3 million worth of funds into these 20 investments.
Hari says it is too early to talk about exit strategies, but notes that it has been a “good run” for XA Network so far. “We certainly hope that they grow up to be unicorns,” she says. “There are several promising ones and I’m excited at the prospect of finding so many bright, young entrepreneurs in the region to back.”
Investing together
XA Network was originally known as Xoogler Angels. It was founded in 2018 by former employees of Google based in Southeast Asia. “But over time, we realised that there was an opportunity to bring on tech executives from other companies too,” says Hari. It now includes members who work for Grab, Gojek, Expedia — tech start-ups that have grown into unicorns themselves.
Hari, who has worked at Twitter since 2014, says she joined XA Network not too long after it extended its membership to non-Google tech employees. This was after she found out about XA Network through an ex-colleague, who invited her to join. Hari says she took up the offer without much hesitation, as she felt that the angel investor network “resonated” with her and with what she could “bring to the table”.
XA Network has traditionally invited angel investors who are executives and former executives of large tech companies because of the expertise they bring. But it is a “loose guideline”, she says. So long as potential members are willing to deploy capital and expertise into the tech start-up community, they are most welcome to join, she adds.
XA Network currently has more than 70 members and counting, says Hari. Most of them are based in Singapore, with some scattered across Southeast Asia. In fact, the number of tech companies represented within the angel investor has also grown and is expected to increase, she points out. This should provide better opportunities for start-up founders to leverage the wider network of angel investors, she says.
So how exactly does XA Network go about investing in start-ups? Hari says any XA Network member can bring their investment opportunities to the table. But it must first be screened by two of XA Network’s leadership members, who will meet the founders to understand the start-up better. Both leadership members must agree to proceed on with the investment process. If a unanimous decision is not reached, a third member will be added to break the tie.
Once two or more “yes” are obtained, the start-up founders will be called upon to make their investment pitches to members. This is an opportunity for members to conduct their own due diligence. Thereafter, those who are interested to invest can arrange and decide amongst themselves whether to do so via a syndicate or individually.
According to Hari, most investment deals have been completed individually. Only a handful of deals were completed via a special purpose vehicle created by a group of members, she points out.
Partnering Vertex Ventures
Recently, XA Network has broadened its investment opportunities. This comes after it entered into a partnership with Vertex Ventures, the venture capital (VC) arm of Temasek Holdings. Under the collaboration, XA Network has become a limited partner in Vertex’s latest Southeast Asia and India fund. Vertex Ventures will be able to access XA Network’s deep tech expertise and vast talent network to support its investments and portfolio companies.
Hari says the tie-up with Vertex Ventures has allowed members of XA Network to diversify their investments. Unlike XA Network, the Vertex Ventures fund invests in start-ups that operate later in the investment cycle. The investment opportunities include Series A, B and beyond. “From a portfolio approach, we have our capital invested in diversified opportunities, while staying true to the core mission of investing in tech companies in Southeast Asia,” she says.
In fact, Hari says that following the collaboration with Vertex Ventures, XA Network is now open to forming partnerships with other VC firms. “It’s not an exclusive partnership by any means. And so it certainly opens up a new model for us to partner with and operate,” she says. “We’d certainly welcome partnership with others.”
Will this include the possibility of collaborating with private equity (PE) firms, which have in recent years begun to invest earlier in tech companies? Hari says she would not discount it. “There’s so many blurred lines between PE and VC in some cases. So that’s why I say: ‘Never say never’. But it would be a call that the members would want to talk about and decide,” she says.
